(a) The general corporate tax rate is 25% (12.5% for the first €12,500 ($18,000) of taxable profit) plus a municipal surcharge up to 1.5% levied on the taxable profit of the company.
(b) Capital gains derived by companies are included in the taxable profit and are subject to CIT in general terms.
(c) Portuguese branches of foreign entities are taxed at the same rate as other companies.
(d) Portugal does not tax the distribution of profits by a branch to its non-resident head office
The upcoming general election in October has meant it has been difficult for the Portuguese government to implement many new guidelines in response to the economic downturn. There have been some new rules such as tax credits for exporting companies and ...
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The upcoming general election in October has meant it has been difficult for the Portuguese government to implement many new guidelines in response to the economic downturn. There have been some new rules such as tax credits for exporting companies and some relief for VAT refunds and deadlines, but as one tax adviser said, the government "has reacted very timidly to the crisis" and the legislation imposed has "had no concrete impact on the economy". One tax professional criticised the government's decision to invest in public spending, for instance in the new Lisbon airport, a high speed train link and new highways. "The government doesn't understand that cash is king," he said. Measures taxpayers would welcome include a reduction in withholding tax and a reduction in VAT.
Tax practitioners have witnessed an increase in tax litigation this year. They put this partly down to the recession and the tax authorities becoming more aggressive in trying to claw back revenue. But they also say it is a result of the tax administration introducing new laws over the past two to three years and now it is trying to enforce the laws in practice more aggressively. Tax advisers predict a further increase in litigation this year. Another challenge for Portuguese taxpayers will be the introduction of international financial reporting standards (IFRS) on January 1 2010. This will mean extra compliance work, but according to one adviser, it will be worth it in the end as it will mean more possibilities for taxpayers to recognise potential profits and losses.
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